Back to GetFilings.com



Table of Contents
 

 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 
(Mark One)
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
OR
 
¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                 to                 Commission File Number: 000-27241
 

 
 
KEYNOTE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
94-3226488
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
777 Mariners Island Blvd., San Mateo, CA
 
94404
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (650) 403-2400
 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES   x    NO  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
                                Class                                 

 
        Shares outstanding at July 31, 2002        

Common Stock, $.001 par value
 
28,490,289
 

 


Table of Contents
 
KEYNOTE SYSTEMS, INC.
 
TABLE OF CONTENTS
 
    
Page

PART I—FINANCIAL INFORMATION
    
  
3
  
14
  
32
PART II—OTHER INFORMATION
    
  
33
  
33
  
33
  
33
  
33
  
33
  
34

2


Table of Contents
 
PART I—FINANCIAL INFORMATION
 
Item 1.    Financial Statements.
 
KEYNOTE SYSTEMS, INC. AND SUBSIDIARIES
 
Index to Unaudited Condensed Consolidated Financial Statements
 
    
Page

  
4
  
5
  
6
  
7

3


Table of Contents
 
KEYNOTE SYSTEMS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    
June 30,
2002

    
September 30,
2001

 
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  
$
51,130
 
  
$
53,130
 
Short-term investments
  
 
192,809
 
  
 
198,566
 
    


  


Total cash, cash equivalents, and short-term
investments
  
 
243,939
 
  
 
251,696
 
Accounts receivable, less allowance for doubtful
accounts of $1,465 and $1,041 as of June 30, 2002
and September 30, 2001, respectively
  
 
5,348
 
  
 
7,862
 
Prepaid and other current assets
  
 
3,103
 
  
 
4,649
 
    


  


Total current assets
  
 
252,390
 
  
 
264,207
 
Restricted cash
  
 
85,000
 
  
 
85,000
 
Property and equipment, net
  
 
14,248
 
  
 
17,208
 
Goodwill, net
  
 
—  
 
  
 
3,025
 
Other intangible assets, net
  
 
3,215
 
  
 
1,472
 
Other assets
  
 
385
 
  
 
1,752
 
    


  


Total assets
  
$
355,238
 
  
$
372,664
 
    


  


LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities:
                 
Notes payable and capital lease obligation
  
 
37
 
  
 
830
 
Accounts payable
  
 
757
 
  
 
2,385
 
Accrued expenses
  
 
8,740
 
  
 
10,626
 
Accrued excess facility costs
  
 
8,854
 
  
 
10,303
 
Deferred revenue
  
 
5,658
 
  
 
5,401
 
    


  


Total current liabilities
  
 
24,046
 
  
 
29,545
 
    


  


Total liabilities
  
 
24,046
 
  
 
29,545
 
    


  


Stockholders’ equity:
                 
Common stock
  
 
28
 
  
 
28
 
Treasury stock
  
 
(1,600
)
  
 
(1,086
)
Additional paid-in capital
  
 
413,971
 
  
 
413,966
 
Deferred compensation
  
 
(197
)
  
 
(452
)
Accumulated deficit
  
 
(83,457
)
  
 
(71,804
)
Accumulated other comprehensive income
  
 
2,447
 
  
 
2,467
 
    


  


Total stockholders’ equity
  
 
331,192
 
  
 
343,119
 
    


  


Total liabilities and stockholders’ equity
  
$
355,238
 
  
$
372,664
 
    


  


 
See accompanying notes to the condensed consolidated financial statements

4


Table of Contents
 
KEYNOTE SYSTEMS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    
Three Months Ended
    
Nine Months Ended
 
    
June 30,

    
June 30,

 
    
2002

    
2001

    
2002

    
2001

 
Revenue:
                                   
Subscription services
  
$
8,516
 
  
$
10,376
 
  
$
25,869
 
  
$
34,484
 
Consulting and support services
  
 
958
 
  
 
693
 
  
 
2,403
 
  
 
1,630
 
    


  


  


  


Total revenue
  
 
9,474
 
  
 
11,069
 
  
 
28,272
 
  
 
36,114
 
Operating Expenses:
                                   
Costs of subscription services
  
 
2,721
 
  
 
3,375
 
  
 
8,970
 
  
 
9,629
 
Costs of consulting and support services
  
 
742
 
  
 
739
 
  
 
2,631
 
  
 
2,223
 
Research and development
  
 
2,140
 
  
 
1,575
 
  
 
6,420
 
  
 
5,400
 
Sales and marketing
  
 
4,709
 
  
 
4,992
 
  
 
14,434
 
  
 
16,578
 
Operations
  
 
1,909
 
  
 
1,832
 
  
 
6,036
 
  
 
5,539
 
General and administrative
  
 
2,071
 
  
 
1,776
 
  
 
6,133
 
  
 
5,265
 
Restructuring costs
  
 
—  
 
  
 
271
 
  
 
—  
 
  
 
271
 
Acquisition-related charges, impairment
and amortization of goodwill and
intangible assets, and stock-based
compensation
  
 
597
 
  
 
34,676
 
  
 
1,203
 
  
 
47,906
 
    


  


  


  


Total operating expenses
  
 
14,889
 
  
 
49,236
 
  
 
45,827
 
  
 
92,811
 
    


  


  


  


Loss from operations
  
 
(5,415
)
  
 
(38,167
)
  
 
(17,555
)
  
 
(56,697
)
Interest income, net
  
 
2,916
 
  
 
3,869
 
  
 
9,064
 
  
 
14,578
 
    


  


  


  


Loss before provision for income taxes
and the cumulative effect of a change
in accounting principle
  
 
(2,499
)
  
 
(34,298
)
  
 
(8,491
)
  
 
(42,119
)
Provision for income taxes
  
 
—  
 
  
 
150
 
  
 
—  
 
  
 
450
 
    


  


  


  


Net loss before cumulative effect of a
change in accounting principle
  
 
(2,499
)
  
 
(34,448
)
  
 
(8,491
)
  
 
(42,569
)
Cumulative effect of a change in
accounting principle
  
 
—  
 
  
 
—  
 
  
 
(3,160
)
  
 
—  
 
    


  


  


  


Net loss
  
$
(2,499
)
  
$
(34,448
)
  
$
(11,651
)
  
$
(42,569
)
    


  


  


  


Net loss per share:
                                   
Net loss per share before the cumulative
effect of a change in accounting principle
  
 
(0.09
)
  
 
(1.24
)
  
 
(0.30
)
  
 
(1.54
)
Cumulative effect per share of a change in
Accounting principle
  
 
—  
 
  
 
—  
 
  
 
(0.12
)
  
 
—  
 
    


  


  


  


Basic and diluted net loss per share
  
$
(0.09
)
  
$
(1.24
)
  
$
(0.42
)
  
$
(1.54
)
    


  


  


  


Shares used in computing basic and
diluted net loss per share:
  
 
27,999
 
  
 
27,784
 
  
 
27,928
 
  
 
27,663
 
    


  


  


  


 
See accompanying notes to the condensed consolidated financial statements

5


Table of Contents
 
KEYNOTE SYSTEMS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    
Nine months ended June 30,

 
    
2002

    
2001

 
Cash flows from operating activities:
                 
Net loss
  
$
(11,651
)
  
$
(42,569
)
Adjustments to reconcile net loss to net cash
from operating activities:
                 
Depreciation and amortization
  
 
6,031
 
  
 
4,167
 
Amortization of goodwill and other
intangible assets
  
 
748
 
  
 
12,075
 
Impairment of goodwill and intangible assets
  
 
—  
 
  
 
30,493
 
Amortization of deferred compensation
  
 
255
 
  
 
5,091